Weekly insights + SMS alerts
CoreWeave Inc. (CRWV) is caught in a tug-of-war between the bond market and the stock analysts, and right now the bond market is winning.
Investors are weighing CoreWeave's rising borrowing costs and heavy debt load against its expanding computing capacity, substantial backlog and improving contract economics. It's the classic AI infrastructure dilemma: the growth story is spectacular, but somebody has to pay for all those GPUs.
BNP Paribas analyst Daniel Wang maintained a positive outlook on CoreWeave, with a $169 price forecast, implying 157% upside from the stock's Oct. 14 closing price of $65.80.
The analyst's comments follow a media report that renewed concerns about CoreWeave's balance sheet and triggered a stock selloff.
Wang said investors should distinguish between CoreWeave's two types of debt: AssetCo financing, which supports infrastructure assets, and ParentCo borrowing, which funds broader corporate needs.
He sees limited repayment risk associated with AssetCo debt because cash flows from the underlying infrastructure should comfortably cover operating costs, interest and principal payments.
However, ParentCo debt presents a greater challenge.
Wang noted that implied yields on certain unsecured obligations have reached 15%, making traditional corporate borrowing increasingly expensive.
As a result, CoreWeave may need to rely on convertible debt or equity issuance to finance expansion until credit investors gain confidence in its ability to fund growth internally.
Despite these risks, Wang expects CoreWeave's financial position to improve as more graphics processing units become operational and newer contracts with better economics generate revenue.
Currently, the cost of building new infrastructure exceeds the cash-generating capacity of its installed GPU fleet.
However, rising cash flow from existing operations could eventually help fund new projects and reduce dependence on external financing.
Wang said CoreWeave's stock performance is becoming increasingly sensitive to credit-market sentiment.
He expects investors to focus on the company's upcoming earnings call for greater clarity on its path toward financial self-sufficiency.
Specifically, BNP Paribas wants management to explain how contracted backlog translates into cash flow after infrastructure debt repayments, corporate expenses and interest obligations.
Wang believes evidence that CoreWeave can meet its corporate debt obligations without repeatedly raising capital could restore investor confidence and ease pressure on the stock.
CoreWeave shares plunged about 16% Wednesday as yields on its bonds maturing in 2031 and 2032 climbed above 15%.
The company's 9.625% bond due in 2032 yielded more than 15.4% and traded near 78 cents on the dollar. Meanwhile, its 9.75% bond due in 2031 yielded over 15.3%.
S&P Global rates CoreWeave B+, placing its debt below investment grade.
Meanwhile, hotter-than-expected U.S. inflation data added to interest-rate concerns, increasing pressure on heavily indebted companies facing substantial refinancing needs.
CoreWeave shares fell nearly 4% in Friday's premarket session.
Despite the bond market's warning signs, Bank of America analyst Tal Liani recently reiterated a Buy rating and a $140 price forecast, implying approximately 105% upside from recent levels.
Liani attributed Wednesday's sell-off to concerns about financing challenges across the AI infrastructure industry.
However, the bank raised its CoreWeave revenue growth forecasts for 2027 and 2028 to 105% and 63%, respectively, from 102% and 58%.
Bank of America expects CoreWeave's active power capacity to surge from 1.5 gigawatts at the end of the second quarter to 4.8 gigawatts by the end of 2028.
It also forecasts annual revenue per watt rising from about $10 to $14 by 2028, supported by the rollout of NVIDIA Corp. (NVDA) Vera Rubin chips.
CoreWeave's contracted revenue backlog stands at approximately $129 billion, highlighting strong demand for its AI computing infrastructure.
Meta Platforms Inc. (META) accounts for 27.1% of that backlog, while OpenAI represents another 17.4%.
However, fulfilling those contracts requires substantial investment.
Bank of America projects approximately $67 billion in cumulative negative free cash flow between 2026 and 2028. It also assumes CoreWeave will raise roughly $59 billion through additional borrowing.
Meanwhile, annual interest expenses are expected to climb from $3.08 billion in 2026 to $5.9 billion in 2028.
Despite those costs, the bank expects CoreWeave's operating profit to fully cover interest expenses by 2028, when the company could report its first full-year profit.
The key question for investors is whether CoreWeave can turn its massive backlog into profitable revenue fast enough to offset rising financing costs.
CoreWeave shares fell 3.90% to $66.97 in Friday's premarket trading, according to market data.
Real-time alerts on price moves, news, and trading opportunities.
Join 20,000+ investors. No spam, ever.
